ISA limits increasing again. Why?

[Lootman]

So the problem stands.

Many years ago, on TMF, there was an advisor who was hostile to ISAs. Instead he advocated insurance based solutions which coincidently paid much higher commissions. Did he perhaps have a point regarding IHT treatment?

I don't know much about insurance products and what I do know about them isn't positive. Moreover I think that ISAs have been a life-saving product for millions of people, not only saving them tax but in many cases enabling them to avoid needing to submit self-assessment tax returns.

My comments were limited to the observation that, for all their tax benefits on lifetime income and gains, ISAs do rather entrap one into being liable for inheritance tax if one just blindly holds them to extinction. Same with primary residences with the caveat that the government has made a half-arsed attempt to allow a extra allowance for them.

The ability to now spray 20K a year into an ISA, 40K for a couple, is tempting. But at some point ISAs may become a poisoned chalice. Governments love captive money more than any other type of money, as their endless efforts to tinker with the rules about pensions make clear.

[AJC5001]

I'm not a conspiracy theorist but I do wonder, as you suggest, if this is all part of a cunning plan by HMG to lull people into these account types and asset classes, only to ultimately get the last laugh. Because the taxes on interest, dividends and gains are trivial compared to seizing 40% of your net worth.

Given that a couple will soon be able to have an estate of £1m without paying IHT, 40% of your net worth is somewhat of an exaggeration.

An estate of £2m would only pay 20% IHT, which is the same as the basic rate of Income tax.

Adrian

[UncleEbenezer]

I'm not a conspiracy theorist but I do wonder, as you suggest, if this is all part of a cunning plan by HMG to lull people into these account types and asset classes, only to ultimately get the last laugh. Because the taxes on interest, dividends and gains are trivial compared to seizing 40% of your net worth.

Given that a couple will soon be able to have an estate of £1m without paying IHT, 40% of your net worth is somewhat of an exaggeration.

An estate of £2m would only pay 20% IHT, which is the same as the basic rate of Income tax.

Adrian

The Man who dies rich, dies disgraced -- Andrew Carnegie.

[AJC5001]

The Man who dies rich, dies disgraced -- Andrew Carnegie.

Why?

Adrian

[mc2fool]

The Man who dies rich, dies disgraced -- Andrew Carnegie.

Why?

Carnegie was a great philanthropist who felt that it was the obligation of the rich to return their money to the societies where they made it, via benevolent causes to improve society, in their lifetime. https://en.wikipedia.org/wiki/The_Gospel_of_Wealth

His major cause was education and his main method the building of libraries, mostly in the USA but also quite a lot in the UK. https://en.wikipedia.org/wiki/List_of_C ... pe#England

Carnegie gave away pretty much all of his wealth, and Gates' and Buffett's pledges to give away 95% and 99% of theirs respectively are in the Carnegie philosophy.

[Lootman]

I'm not a conspiracy theorist but I do wonder, as you suggest, if this is all part of a cunning plan by HMG to lull people into these account types and asset classes, only to ultimately get the last laugh. Because the taxes on interest, dividends and gains are trivial compared to seizing 40% of your net worth.

Given that a couple will soon be able to have an estate of £1m without paying IHT, 40% of your net worth is somewhat of an exaggeration.

An estate of £2m would only pay 20% IHT, which is the same as the basic rate of Income tax.

That last line is a particularly self-serving computation. You might as well say that if the estate was £1,000,010 then the IHT is only £4 - a rate of 0.0004%

And to get that million exemption you need much of it to be in the form of a property, and we're talking here about ISAs, for which the nil-rate band is currently between £325,000 and £650,000. Beyond that the take is indeed 40%, and my point is that you need to liquidate that ISA first in order to adopt any strategies to avoid IHT (aside from packing it with AIM shares which I have already dismissed).

[Lootman]

Carnegie was a great philanthropist who felt that it was the obligation of the rich to return their money to the societies where they made it, via benevolent causes to improve society, in their lifetime. https://en.wikipedia.org/wiki/The_Gospel_of_Wealth

His major cause was education and his main method the building of libraries, mostly in the USA but also quite a lot in the UK. https://en.wikipedia.org/wiki/List_of_C ... pe#England

Carnegie gave away pretty much all of his wealth, and Gates' and Buffett's pledges to give away 95% and 99% of theirs respectively are in the Carnegie philosophy.

Indeed but then back in Carnegie's time taxes were very low and so the rich would likely feel that they had not already contributed a huge amount of involuntary charity. I can certainly understand it these days if billionaires do not feel so obligated and generous.

And it has been suggested that the generosity of Gates and Buffett had a lot to do with their desire to avoid US death duties which, as in the UK, take 40% above an admittedly rather more generous nil-rate band. And they are "giving it away" to a trust that their family members and close advisors will continue to control in perpetuity.

[Kantwebefriends]

And it has been suggested that the generosity of Gates and Buffett had a lot to do with their desire to avoid US death duties which, as in the UK, take 40% above an admittedly rather more generous nil-rate band. And they are "giving it away" to a trust that their family members and close advisors will continue to control in perpetuity.

Golly, do US trusts run in perpetuity? Or does it depend on the state in question?

[Kantwebefriends]

So the increase in the ISA limit scarcely puts us to where we would have been without Culpability Brown

That joke has not yet worn thin. Keep it going.

[Kantwebefriends]

According to the Telegraph last year, one million British households had over a million dollars excluding property.

I wonder why you'd exclude property. And "luxury goods"; what's the point of that? One can always sell one's yacht, surely?

Did they add the capitalised value of DB pensions, including the state pension? If not why not? Maybe they should include the capitalised value of the right to use the NHS and so on.

[Lootman]

And it has been suggested that the generosity of Gates and Buffett had a lot to do with their desire to avoid US death duties which, as in the UK, take 40% above an admittedly rather more generous nil-rate band. And they are "giving it away" to a trust that their family members and close advisors will continue to control in perpetuity.

Golly, do US trusts run in perpetuity? Or does it depend on the state in question?

It's a Private Foundation and not a Trust. The Carnegie Foundation is still going strong, I believe, after more than 100 years. Ditto the Rockefeller Foundation.